Cartel Investigations in Georgia — the Real Legal Picture
It is best to state clearly at the outset: the general rules of cartel investigation are defined by Georgian competition legislation and enforced by the Competition and Consumer Protection Agency; this page rests on the chapters of the Law on Electricity and Water Supply that regulate competition on the energy market. Sectoral oversight of the energy market relies precisely on the instruments permitted by that law — market investigation, the assessment of significant influence and concentration control.
If you are affected by cartel behaviour on the energy market — price fixing, market sharing or the restriction of a competitor — your legal route is twofold: the general competition claims and the sectoral mechanisms established by the energy law, which we examine in detail below.
The Energy Market Investigation — Who, When and How
Under the law, the commission ensures the creation of appropriate conditions for the existence and development of effective competition on the energy market and the timely detection and elimination of restrictive practices. To these ends the commission supervises the market and, where necessary, conducts an investigation of the energy market: at the request of the Government of Georgia, the ministry, the Competition and Consumer Protection Agency or the Public Defender of consumers' interests; at the request of a market participant which suffers direct property damage as a result of a restrictive practice and has evidence confirming it; or on its own initiative.
The investigation covers the definition of the market by services, product supply and or geographical areas; the analysis of the effectiveness of competition and the assessment of concentration data, including the market share of each enterprise and the level of competition between several enterprises; information on persons with significant influence on the market; and conclusions with a decision or recommendation on regulatory measures. The investigation is conducted in accordance with the market monitoring rules approved by the commission and its decision on conducting the investigation, in cooperation with competent state authorities and in line with the regulations of the Energy Community and best international practice.
Time Limits and Public Consultations
Procedural discipline is clearly established. The commission holds public consultations for the investigation, analyses the comments and recommendations received and publishes on its website their consolidated overview with explanations. The time limit for conducting the energy market investigation is 7 months, counted from the day of the commission's decision to conduct the investigation; where there is a duly substantiated reasonable necessity, the commission is entitled to extend this period by not more than 4 months.
The investigation ends with a decision of the commission responding to the components of the investigation. A decision or recommendation on regulatory measures may provide for: the revocation of an energy activity license; a fine; the application of market opening incentive measures; an application to the competent state authorities regarding the compliance of a market participant's activity; and the temporary prohibition of participation in the energy market for one or more participants. The results and the respective decision are submitted to the Government, the ministry and other competent state authorities and are published on the commission's website.
Significant Influence on the Energy Market
The analytical core of the market investigation is the category of significant influence. An enterprise is deemed to have significant influence on the market if, independently or in agreement with one or more enterprises, it holds a market share that may be considered significant. A market share is considered significant if it gives the enterprise or group of enterprises economic power to conduct commercial activity independently of competitors, clients or consumers. The amount of the significant market share and the method of its determination are established by a legal act of the commission.
Significant influence may extend to closely related markets as well, where the interconnection of those markets allows the enterprise to use its influence on one market to increase its influence on another. Once the commission has adopted the respective decision, the enterprise is deemed to have significant influence until the commission decides otherwise, and such status may condition the application of market opening incentive measures. For dominant players this creates a continuing compliance regime rather than a one-off assessment.
Concentration Control
Cartel risk is joined by the issue of concentration. A concentration in which the value of assets or the annual turnover of the participating regulated enterprises, individually or jointly, exceeds on the territory of Georgia or any side of the Energy Community the threshold amount established by a normative act of the commission requires prior notification to the commission. After receiving the notification, the commission decides on the compatibility of the planned concentration with the competitive environment.
A concentration that restricts effective competition on the energy market of Georgia, its part or any side of the Energy Community is impermissible; where a concentration creates or strengthens a dominant position, it is presumed to restrict competition unless the regulated enterprise proves otherwise. Registration requires a positive decision of the commission, and a negative decision is a ground for the National Agency of the Public Registry to refuse registration of the concentration. A competition restricting concentration or a violation of the prior notification obligation entails a fine, and the commission is entitled to demand the unwinding of the concentration — through the annulment of the merger or the divestiture of shares and assets — so as to restore the situation existing before the concentration, and to impose sanctions.
Practical Conclusions
For an injured party these mechanisms mean: a market participant that has suffered direct property damage from a restrictive practice and has evidence of it has the right to request an investigation from the commission. For a prospective participant, the rules on significant influence and concentration are a subject of advance planning: if the threshold amounts are checked before a merger or acquisition, the process becomes predictable.
Finally, bear the time limits in mind: the investigation lasts 7 months with the possibility of a 4 month extension, so the substantiation of one's position and the preparation of evidence should begin before submitting the request — in competition disputes, time and documentation are half the battle.